Foreign investment in Chile requires more than incorporating a company. From selecting the appropriate legal structure to appointing a legal representative, coordinating corporate taxes across jurisdictions, and protecting assets under Chilean law, every decision carries legal and financial consequences that must be addressed from the outset. Spencer Global Law provides the legal framework foreign investors and companies need to operate in Chile with certainty.
Spencer Global specializes in providing corporate and business support services for small to medium size ventures in Chile. From international companies opening a local subsidiary, to the private entrepreneur chasing a personal dream, at Spencer Global we understand that there is far more to starting a successful business venture in Chile as a foreign investor than simply incorporating. We have helped clients do everything from open branch service offices in Santiago, to building commercial telescopes in Northern Chile, to establishing fly fishing lodges in the remote Patagonia. We provide the sort of comprehensive support services and advice you will need to help you navigate the business regulations and cultural differences in Chile, both before and after you start your business.
Incorporating in Chile involves a series of decisions that go well beyond selecting a corporate structure. The articles of incorporation must specify the company’s authorized activities in precise detail — a requirement that surprises many foreign investors accustomed to common law traditions — and the choices made at the time of formation are difficult and costly to modify after the fact. Spencer Global advises foreign citizens and international companies on the appropriate structure for their investment, drafts articles of incorporation with the scope and flexibility required for efficient operation, and coordinates the full incorporation process, including banking requirements, legal representative arrangements, and international tax considerations.
Foreign citizens with assets in Chile face legal exposure that requires careful planning from the outset. Chilean law grants foreign property owners the same rights and constitutional protections as Chilean citizens, but effective asset protection requires more than legal title — it requires a structure that makes it significantly more difficult and costly for any third party to gain rights over those assets. Spencer Global advises on asset protection arrangements in Chile, including corporate separation structures, international holding arrangements, and private mortgages over real estate, coordinating with foreign counsel and tax experts to ensure that any structure implemented in Chile is consistent with the client’s obligations in every other jurisdiction where they maintain ties or interests.
Every company incorporated in Chile must designate a legal representative — a Chilean citizen or permanent resident vested with ultimate signature authority over all official acts of the company. This concentration of power creates significant risks for foreign owners, particularly those with limited familiarity with Chilean law, and the abuse of representative authority is a well-documented problem in Chile. Spencer Global provides legal representative services for foreign-owned companies, acts as the designated representative before Chilean authorities and the internal revenue service, and advises on the precise structuring and restriction of representative powers within the articles of incorporation to protect the interests of foreign partners and shareholders.
A RUT number — Chile’s tax identification number — is required for any transaction with tax consequences in the country, including real estate purchases, vehicle transfers, and company incorporation. Since 2015, foreign citizens must designate a Chilean resident or citizen with a permanent local address to act as their representative for official notifications from the internal revenue service before a RUT will be issued. Spencer Global obtains RUT numbers for foreign clients through a special limited power of attorney, whether the client is inside or outside Chile, and fulfills the local representative requirement directly, ensuring the process is completed without the need for the client to be physically present.
Powers of attorney are required for a wide range of legal and administrative transactions in Chile — from real estate closings and RUT applications to company incorporation and court proceedings — and are an essential tool for foreign citizens who need to act through a representative while outside the country. A poorly drafted power of attorney, even one that has been properly executed and legalized outside Chile, can be rejected by any notary, government office, or private party in Chile who determines it does not meet the required formal or substantive standard — an outcome that, after the time and expense of consular appointments or apostille procedures, can cause significant delays and financial consequences. The scope of any power of attorney must also be carefully considered: delegating authority that is broader than strictly necessary exposes the grantor to serious legal and financial risk, and Spencer Global has handled cases where imprecisely drafted or overly broad powers of attorney have been abused by the persons to whom they were granted. Spencer Global drafts powers of attorney with the precision and specificity Chilean law demands, coordinates execution at Chilean consulates abroad or through the applicable legalization process, and ensures that each document is limited strictly to the tasks for which it is intended — protecting our clients’ interests at every stage of the process.
Foreign citizens and international companies operating in Chile face tax obligations that extend well beyond what Chile itself will charge. Activities in Chile must be synchronized with the client’s international tax position — in terms of both minimizing fiscal consequences and ensuring full compliance with Chilean tax law and any foreign jurisdiction that may apply. Chile is also a party to a growing number of international tax information sharing agreements, meaning that assets and activities in Chile are increasingly visible to foreign tax authorities. Spencer Global coordinates with tax experts inside Chile and with the client’s advisors in their home jurisdiction before any significant transaction is completed or any corporate structure is established, ensuring that every arrangement is legally sound and fiscally efficient across every relevant jurisdiction.
There is a famous saying, often attributed to Will Rogers: "I'm not as concerned about the return on my money as I am the return of my money." Regardless if Will Rogers said this or not, the idea of protecting your investment is a good starting point when planning for the protection of your assets in Chile. We want to take a look at some considerations for asset protection in Chile.
When planning for asset protection in Chile, it should be first understood who or what you are protecting your assets from. If you are trying to protect your assets from an asteroid hitting them, it is a very different set of plans than trying to protect them from some sort of legal liability claim. We will be only dealing with the latter here. It should be also be stated from the start, there is no such thing as a 100% guaranteed protection from all the possible legal issues that an asset, investment, or estate might be subjected to; and, this is probably true in almost every country of the World. We depend on a legal framework to define our property rights over an asset, and thus we will always be subject to the legal mechanisms created to end those rights.
So, assets start with property rights, and how strong those legal property rights are enforced in any given country or jurisdiction. Asset protection, starts with enhancing or leveraging those property rights to extend the protection. In short, it is about making it incredibly difficult and / or expensive for anyone to gain rights over an asset. As the saying goes, possession is 9/10ths of the law. We would extend that to include Chile, and possession is 9/10ths of the law everywhere. So, for the purpose of asset protection planning, maintaining possession of the asset is the goal.
So, first, let us look at property rights in Chile. Specifically how property rights exist in Chile, and more importantly property rights of foreigners. There are three basic principles of the Chilean constitution that should thus be noted, as they are basis for asset protection in Chile:
In short, foreign citizens have the same rights to property, and thus same legal protections as Chilean citizens and residents before the courts and under the law. Again, to implement a plan for asset protection, is to seek to enhance those basic legal protections, by applying additional legal protection.
So, how much protection do you need for your assets in Chile?
To answer how much protection you need, you should first understand how difficult it is for someone to bring a legal claim in Chile (i.e. know your enemy). Thus, the first line of defense is bureaucratic. Chile is extraordinarily bureaucratic. Chile is not a common law country, so rarely do courts accept something like "good intentions" or "almost complied with the formalities". Court procedures are typically very slow and must be followed exactly. Formalities that are not complied with are breeding grounds for appeals. Frequently rather run-of-the-mill civil cases take technicalities not only to the appeals court level, but to the Chilean supreme court; and in any given case, multiple points may be appealed along the way.
There are very few situations in which someone may bring a claim in court against someone's property without that claim being "legally noisy". That is, the owner of the property must be notified, to allow them to legally defend against the claim, in a very strict formal manner, by official court channels, public notifications, and/or served by court appointed process server. Often that notification must be given in a very specific way, at an official place of residence, by a specific court appointed person.
In the case of a foreigner, with official domicile or residency outside of Chile, this becomes a rather slow and error-prone logistical task of navigating official diplomatic channels. It can be done, but it is expensive and time consuming, and most attorneys in Chile have no experience with the procedure involved in serving an international legal notice by diplomatic channels. There is a good chance that, even if an opposing party managed to complete this task, the lack of experience of the parties involved will generate grounds for appeal or other challenges to the procedure used.
Often the normal legal channels are sufficient protection. Chile has very strong private property laws, and the overwhelming majority of laws are written with a bend in the direction of protecting owners of private property first, and the party bringing the claim second. As a general rule, those that bring a legal claim in court are typically at a disadvantage from the start in terms of costs (they must pay their own legal bills), time (cases can range from 2-6 years with appeals), and burden of proof (they will need to have a compelling case). Attorneys in Chile rarely take cases on a contingency basis. Further, Chile has no such thing as punitive damages. A person may only be sued for actual damages. Thus, your legal exposure is from the start capped in a way, by the simple costs and difficulty in bringing a claim in court. Thus, the higher the value of the asset in Chile, the more it makes sense to protect the asset with more in-depth defense.
Creating degrees of legal separation between yourself (the true owner or beneficiary) and the asset in Chile may be worth the work. In some cases, simply placing the asset in the name of a family member or someone else you trust will suffice in terms of legal protection.
There are also specialized legal protections available for family assets. For example, a house where your family lives may be declared "family property", and this removes the house from being considered as an asset to be included in any proceeds awarded by the court. In short, you cannot leave someone and their family homeless, even if a judgment is issued against the person. Please note, this also has very important implications for limiting what you may do with the property without consulting your family.
In other instances, creating a holding company in Chile, or other legal entity, is a good strategy for providing privacy and a firewall of protection against legal claims. This is typically used by companies in Chile to create one company that has extraordinary risk attached to it (e.g. employee claims), while another company structure holds title to, say, a factory. The usefulness of this is fairly endless, and is the basis of corporate law in many ways.
Increased protection may also be generated by increasing the legal abstraction level of any asset's ownership. For example, a company in some other foreign country may own the shares of a company in Chile, that owns a factory in Chile or other tangible asset. Although on the surface this seems like a simple and appealing solution, you need to carefully calculate the costs associated with maintaining such a structure.
For a low-value estate or asset, the costs over many years of maintaining this structure could quickly eat into any profits or even original capital. Companies in Chile need, for example, to file monthly declarations to the Chilean internal revenue service; an accountant must be paid to handle this, even if the company does not generate any income for the month. Some company structures may be subject to sales tax on certain asset sales — as opposed to a private citizen directly owning a property and selling it either tax free or at a lesser tax rate.
A simple mortgage over real estate. One of the more common and simple methods is to place a private mortgage over a property. This could in theory be for any amount you like, including much more than the market value of the property. This must be registered on the title to be fully effective, and ideally placed as a first-order mortgage or lien. In the event of a court-ordered auction of the property, the mortgage holder is first in line to be paid. Any other claim or debt on the property will be secondary and paid out of remaining funds from the public auction. It is possible for a mortgage owner to simply use the debt to acquire the property at auction, free of most other liens. This is often a cost-effective way to protect real estate, but it must be implemented carefully and correctly to be effective.
We will caution: Chile is a party to many international tax information sharing agreements around the world, and is increasingly implementing measures to assist foreign tax authorities in finding assets being hidden in Chile.
An asset protection scheme may be legal in Chile; but that does not mean it is legal in any jurisdiction you may owe taxes or have other legal considerations. Just because some foreign government or agency cannot directly attach your asset in Chile does not mean they cannot punish you in other ways for placing assets in Chile (e.g. hold you in contempt of court).
You will need to discuss any tax implications of an asset protection structure with an attorney or tax expert in those other jurisdictions. We are happy to work with your foreign attorneys and tax experts to find you a system that will comply with the laws of Chile and any other jurisdiction you may need to consider in planning for your asset protection in Chile.
If you would like assistance with assessing your exposure and possible strategies for protecting your assets in Chile, please feel free to contact us.
Spencer Global's attorneys regularly publish on the legal and regulatory considerations facing foreign investors in Chile — from company structure to legal representation to cross-border tax coordination. The following articles draw on the firm's direct experience advising international companies and individual investors across a wide range of industries.
A power of attorney can be executed for just about anything in Chile. Powers of attorney should be limited in scope to particular tasks or goals, and they MUST be drafted by a qualified attorney. A poorly drafted power of attorney, after getting all the proper authorizations outside the country, can ultimately be rejected or accepted by each notary, government office, or private party in Chile, if not drafted correctly. The amount of effort and expense you need to validate a power of attorney inside of Chile, from outside Chile, makes it essential that the Power of Attorney be well drafted from the start.
Remember, any power of attorney you sign is delegating your legal rights to someone else, and you are responsible for whatever that person may do with that power in your name.
Keep it simple, and only give powers of attorney to people you trust, and limited to the powers required to complete very specific tasks. We have seen a lot of foreigners get themselves in financial and legal trouble because they easily gave away far too broad of powers, in a power of attorney document. Many simply did this because they thought it might be convenient or save time; or, they thought the person they just met was very “nice”.
So, you have a power of attorney, drafted by a qualified attorney in Chile. Now, your first step is to make a decision about the easiest of two methods open to you to get a document notarized outside of Chile. The first is to simply find your nearest Chilean Consulate and go there to sign it. Normally the document must be sent in advanced to the consulate, and an appointment made to visit. Your Chilean attorney should assist you with this process of scheduling to sign at a consulate.
The second option is to have the document notarized by a local notary from your home country, then have that signature legalized by your State department legalization office ( or your countries equivalent ), followed by having the document mailed to the Chilean consulate responsible for your area to validated it in your home country.
The procedures will often differ from country to country, document to document, and ultimately may depend on the purpose of the document. We caution that legalization for Chile, is not the same as an apostille certificate. The apostille is a mechanism under the Hague convention for member countries to recognize documents from other members countries. Chile is only became a party to the Hague convention on document legalization in 2017. Other countries may need to complete the traditional process of legalizing documents.
The first method of directly signing a Power of Attorney at the Chilean consulate is the preferred method because it leads to the least number of potential mistakes. We have had numerous problems with foreign legalization of local notary signatures. Stamps get missed, offices and signatures get missed, and common foreign practices can often be confusing to the parties accepting the power of attorney in Chile at the end of the process. By signing at the Chilean consulate, you are directly notarizing a Chilean document.
Going to the local consulate is often not a problem, if for example you live in a major international city such as Los Angeles, New York, or London. If however the time and expense involved in reaching your nearest Chilean consulate is too high or simply impossible, legalizing a local notary signature may be your only option. It simply needs to be done carefully, and be properly supervised by your Chilean attorney to insure that no critical steps are missed.
Every country has a slightly different system for legalizing documents for countries that are not party to the Hague Convention. For example, in the United States there is a legalization service that handles pushing the document through the various levels of State and Federal offices to authenticate that the notary is in fact authorized to notarize documents in the United States. In whatever country you have it done, each signature of each official above the notary must certify the chain of authority for that notary all the way to your foreign ministry or state department level. So, you can see where there are lots of ways for things to go wrong or be missed.
Once you receive all the legalization or authentication of the signature of your local notary public inside your country, you must then send the document to the Chilean Embassy to have them finally certify that all the authorizations are legal and valid for that country. In our experience however we have discovered that from consulate to consulate this can be done with different levels of care.
Regardless of what method you use to notarize the document outside of the Chile, once the document arrives in Chile it must go to the Chilean Foreign Affairs Office in Santiago to have the Chilean Consul’s signature in the foreign country authenticated, in order for the document to be a valid legal instrument in Chile.
This might all seem very complicated, and we highly urge you to seek professional assistance with the process, but this system is also designed to protect you and the public in Chile from shady or illegal deals. It makes it extremely difficult for someone to use a forged power of attorney in Chile. The legalization process and public notary system in Chile also has the added benefits of helping to cut down on legal cost and time, should you ever need to go to court. The authenticity of properly legalized and notarized documents rarely needs to be questioned in Chile. The purpose of legalization, in part, is to relieve each government office or private party, from needing to individually authenticate every foreign document. The document is recognized as a fully legal document in Chile by all third-parties.
So the easiest method, if at all possible, is to sign a power of attorney or your contract directly inside Chile at a notary public while you are in Chile. Ideally you should plan ahead, if you are visiting Chile and know you will not be able to be present for some official function after you leave. Second, if you can not sign in person inside Chile, try to make plans to visit your nearest Chilean consulate to sign a power of attorney for Chile or other Chilean documents requiring notarization in Chile.
Only as a last resort should you depend on the long and sometimes costly process of legalizing your local notary’s signature in your home country. This also must be done with other documents generated in a foreign country such as birth certificates and marriage certificates. It is not impossible, it simply must be done with care.
Zandra Valenzuela is a Chilean Attorney at Law and a professor of international law. Zandra specializes in private international law and international jurisdictional issues, and is senior legal council at Spencer Global.
Incorporating in Chile starts with making some serious decisions about what the overall business goals are will be in Chile, and what activities your new company will engage in now and as far in the future as possible. These decisions should be made carefully now, as the articles of incorporation in Chile can be expensive and time consuming to modify after formation of the company. We will take a brief look at a few things you need to consider in order for your attorney in Chile to draft articles of incorporation in Chile that are flexible.
Things to consider when incorporating in Chile:
Opening a bank account in Chile for most new companies is one of those things taken for granted by many foreigners, but in Chile banks are very conservative and prefer to play it safe when in doubt about the credit worthiness of client. Especially when foreign without residency in Chile and unknown legal entities are concerned. This is especially problematic for foreigners, as often the partners in the new company have no credit history of their own inside the country and the new company has very little capital or assets. If opening a bank account is an immediate goal of the company, then we often recommend that drafting articles of incorporation start with coordinating with the bank requirements.
Another common area of concern is taxes. Foreigners as private individuals and foreign companies planning to do business in Chile, often have far more to consider in terms of taxes than just what Chile will charge. They must insure that their taxable activities in Chile are synchronized with their international tax situation, both in terms of minimizing tax and financial consequences and in terms of insuring they are complying with both Chilean tax law and any foreign jurisdiction they may need to deal with. For clients that have such international tax issues, we often coordinate with tax experts both inside Chile and with their tax experts outside Chile, before drafting the articles of incorporation for the new company in Chile.
You will also need to consider the type of structure to use, depending on the type of operations you will engage in. A private individual or foreign corporate instigators, even relatively large foreign companies, tend to want to jump in to forming a full Sociedad Anónima (S.A.) from the start. Sometimes, even for large international companies, that is much more than is required such as in the case of opening a simple sales office in Chile to represent a product. A full S.A. type company in Chile simply brings greater regulatory and record keeping costs, when something like a standard Chilean Limited Liability Company or the newer SPA would be just fine. For a single foreign private investors in Chile, often the E.I.R.L. is all they need. However, in many case the one person company, the E.I.R.L. can be too small a structure. For example, a tour guide with no partners and very specific and limited business activities. A situation where in most countries they could simply operate as sole proprietor.
If no one structure fits, it is common practice in Chile to split the company in to several related entities. For example, one company for handling hiring employees, one company to hold assets of the company, another company to handle sales and product liability.
Every company in Chile must have a “legal representative”. They must be a Chilean citizen or full permanent resident of Chile.
Scope of the articles of incorporation is another area to consider carefully. Regardless of the type of company, the articles of incorporation will need to specify in great detail the exact activities the company will engage in, and the level to which those are spelled out in great detail in the articles of incorporation in Chile surprises many foreigners, especially those from a country with a common law tradition. For example, it is typical for articles of incorporation in Chile to explicitly state such things like, “the legal representative is authorized to open bank accounts, close bank accounts, take checks from the bank, sign checks, mail checks, cancel checks, ….”.
This level of detail is required in the articles of incorporation because in dealing with day to day activities, third-parties will look to those articles of incorporation and if not explicitly stated as a power given to a representative of the company, they will often refuse to permit that activity or recognize your representatives authority. For example, do you really want to have to go through the expense of modifying the articles of incorporation, should some bank executive decide they are not going to allow a representative of the company to sign a check, open an account, or so on? So, careful consideration must be given to the full range and scope of the activities of the company at the time the articles of incorporation are drafted in Chile.
There are many more considerations, many specific to your circumstances and goals, when incorporating in Chile. With some careful planning and advice from the start, most problems can be avoided.
For a person to qualify to be a legal representative of a company in Chile under Chilean law, the person must be an adult over 18 years of age and a permanent resident or citizen of Chile. They do not need to be an attorney, accountant, or even a partner / shareholder in the company; however, they may be such a person. They can simply be an employee of the company or volunteer third-party. Foreigners cannot act as legal representatives of a company even if they own a majority of the company, until they have obtained full permanent residency status in Chile. A legal representative is someone designated to be the legal "face" of the company with ultimate signature authority over all official acts the company might undertake. This obviously creates the potential for problems.
This concentrates a lot of power in to very few hands in companies in Chile. The abuse of their position by a legal representatives is a very serious problem in Chile, especially when foreigners may be partners or owners in the company, and fail to appreciate the full scope of the powers they have given to the legal representative. When a legal representative is appointed or elected, the powers are typically given by a formally notarized document. This is binding on the parties, and third-parties are legally protected if they act on that document. The will and intent of the signers is considered settled at the time that document is signed before a notary public.
We have encountered many cases where legal representatives have decided to do things like sell assets in the company; or, simply seize total control of the company. In the more extreme cases, there was very little legally the owners of the company could do after the fact because they had given their full consent to wield unrestricted power to the legal representative of the company. Thus, foreigners, with possibly limited language skills and even more limited understanding of Chilean law, should be very careful when choosing whom will be the legal representative of their company in Chile, what powers they will be allowed to exercise, and under what conditions.
The responsibility of a corporate legal representative also cuts the other way. A legal representative assumes certain personal legal liabilities. For example, if a company fails to pay taxes in Chile, the Chilean Internal Revenue Service (Servicio de Impuestos Internos de Chile) may bring criminal or civil penalties against a legal representative directly. In a civil law suit brought against a company, it is the legal representative that is served to appear in court. Thus, for all concerned, it is not a duty to be taken lightly.
So, what can be done about this?
The most important things is that in drafting the articles of incorporation in Chile, and any related contracts regarding the powers of the legal representative, that the powers given to the legal representative must be properly restricted. For example, in the articles of incorporation, a legal representative could be required to obtain the signature authorizing the sale of any real estate assets from the partners or shareholders. They could also be restricted in the amount of money they can transfer without authorization. For example, they would need to request authorization for transfers of over $10,000 US.
It is important however that these restrictions not be so strict that the legal representative can not function. The legal representative still needs sufficient authority to act in a timely manner to conduct day to day business on behalf of the company. Thus, careful planning at the time of incorporation regarding the structure and authority of the legal representative, and should take in to consideration what powers are essential for the company to function efficiently in regards to the mandate given to the legal representative.
Please feel free to contact us to discuss with one of our attorneys in Chile about your options for handling the problem of legal representatives in Chile when planning to incorporate in Chile.
There are two types of numbers commonly referred to as a "RUT" in Chile. A temporary "RUT" or "rol único tributario" for foreigners is only a tax payer ID number. Another type of "RUT" (sometimes called RUN) is for Chilean citizens and Chilean Residents. The permanent RUT for citizens and residents is a national ID number, similar to a Social Security Number, and is used for passports, tax issues, identification, and many other things. Companies are also issued "RUT" numbers for tax purposes.
You do not need to be a resident of Chile to obtain a temporary RUT number. A RUT number is required to make any major purchase in Chile, with tax consequences, and is issued by the Internal Revenue Service of Chile (Servicio de impuestos internos or simply SII in Spanish).
A temporary RUT numbers does not entitle you to residency in Chile or citizenship in Chile. To obtain a permanent RUT number you must apply for Residency. Most Chileans, and even many attorneys in Chile, are not aware there is such a thing as a temporary RUT number for foreigners in Chile.
In 2015, the government of Chile has imposed a new requirement on foreigners obtaining a temporary RUT numbers. Prior to 2015, it was possible for foreigners to simply obtain a RUT number with their passport at any IRS office in Chile by filling out a form. Now, foreigners are required to have either a resident or citizen of Chile with a permanent address in the country, to act as your “legal representative” for the purposes of obtaining official notification or correspondence from the Chilean Tax authority before they will issue a temporary RUT number for foreigners in Chile.
Spencer Global can obtain RUT numbers for clients through a special limited power of attorney, when foreigners are either outside of Chile or inside of Chile.
In addition for drafting and arranging for you to sign the limited power of attorney, applying for the RUT number with the SII, we include in our service acting as the “legal representative” or point of contact for official notifications from the SII office in Chile to fulfill this new requirement for foreigners in Chile.
In most cases foreigners only need a temporary RUT number when they plan to do such things as purchase real estate, vehicles, incorporate, or engage in transferring other major assets that require the payment of taxes in Chile.
To learn more about obtaining a Permanent RUT number, please see our Chile Immigration and Visa section.
We review your business goals and operations in Chile to determine the appropriate company structure.
We draft the articles of incorporation, defining the company's scope of activities and the powers of the legal representative.
We complete the incorporation process, obtain the company's RUT number, and coordinate the requirements for opening a Chilean bank account.
Support for tax coordination, legal representation requirements, and the company's continued compliance in Chile.
Request a call or meeting with our team in Santiago or Southern Chile.
